President Obama convenes a "jobs summit" at the White House today, as our nation faces its worst employment crisis in the last 25 years. In preparation, he should carefully read an article in the October edition of Trends magazine titled, America's Future: California vs. Texas.
The analysis contrasts the stark difference between the two states' current economic environments. It also offers observations about how each arrived at this point. The lessons for Washington policymakers are clear. The only question is which model--California or Texas--will the president and his congressional allies embrace.
Former Bush White House domestic policy advisor Ryan Streeter believes the president should look for answers in the Lone Star State. Streeter now follows U.S. domestic policy from a distance--literally. He's both out of government and out of the country, providing him a unique dose of detachment and perspective. Streeter is now a Senior Fellow at the Legatum Institute, an independent public policy think tank in London. In an email exchange last week Streeter told me the Trends article, along with some additional commentary on the two-state metaphor at another online magazine, New Geography, should provide guidance to Obama as the White House tackles the jobs/economic growth puzzle in the months ahead.
"California, as everyone knows, has a coolness factor that Texas cannot match," Streeter wrote in a blog post at The American recently. "But unless one has been living in a cave, everyone knows the cool state is also the broke state." The Trends article supports this point: "From the Great Depression on, California was a dream destination for Americans. Now it looks more like a nightmare, taking on new debt at a rate of $25 million a day."
Texas, on the other hand, boasts unemployment lower than the national average, a budget surplus, no state income taxes, and low rate of repossession on mortgage defaults, Trends writes.
In other words, Texas is economically ascending, while California is in a nosedive.
What accounts for the differences? The Trends article posits four.
First, Texans believe in laissez-faire markets with an emphasis on individual responsibility. California, on the other hand, has favored central planning solutions and reliance on a social safety net for the past two decades.
Second, California treats environmentalism as a "religious sacrament," rather than just one component in people's quality of life. Texans take a more balanced approach.
Third, California elevates "ethnic diversity" above "assimilation," while Texas has done the opposite.
Finally, while Texas has emphasized streamlining regulatory and litigation burdens, California has used the government to transfer wealth from its creators to special interest groups.
Taken together, these four factors shape the economic landscape and the political culture confronting the two states today.
And for anyone watching Washington over the past year, Democratic policies look eerily Californian.
From his perch in London, Streeter agrees. "The Obama administration is behaving as though California were its model for growth," he wrote in The American. "Increasing unfunded liabilities, proposing a $1 trillion in new health care spending, responding to the economic crisis with new regulatory agencies but balking on the core causes of the problem."
He's right. Expanding government and ballooning debt will ultimately backfire, creating disincentives for the entrepreneurs and innovators that spur real economic growth and create jobs.
Streeter maintains that the UK has also pursued the California model and entrepreneurs are leaving in droves. Civic duty to pay taxes and just "take it," as layer upon layer of new regulations are heaped upon wealth creators wears thin, he says.
Texas, on the other hand, with its more entrepreneurial political culture, created 70 percent of the new jobs in the United States in 2008, according to the Trends article. Think about it, one state created 7 out of 10 jobs!
The White House jobs summit is a public relations gambit, not a serious employment generator. In fairness to the president, he has to do something. This is the Obama equivalent of the infamous George H. W. Bush line: "Message: I care." But the real problem is one of cognitive dissonance for the entrepreneur.
While Obama says he wants to create jobs, his interest group allies stand in the way. Jobs producers need litigation reform (the trial bar opposes it); they seek lower taxes (public employee unions don't); they want streamlined environmental regulations (environmental interest groups say no).
"Go West Young Man," a Terre Haute Express editorial wrote in 1851. That's still good advice today for a president seeking a jobs agenda. But he ought to stop at Texas.
Gary Andres is vice chairman of research at Dutko Worldwide in Washington, D.C., and a regular contributor to THE WEEKLY STANDARD Online.